Mining royalties company Anglo Pacific Group had a difficult first quarter. However, things were much better in the second three months.

Anglo is an investment company that provides funding to mining groups in return for stream of royalties, from which it pays dividends, as well as investing for future royalty payments. The advantage of this model is that as the group does not own any mines itself, it does not have significant overheads.

In the first quarter of 2012 royalty income plunged to £1.5m from £9.9m in the same period last year. This was caused by problems at Kestrel, Rio Tinto’s coking and thermal coal mine in Australia, from which Anglo gets the majority of its royalty income at the moment. The mine was hit by inclement weather and delays changing over a “longwall”, a form of underground mining where coal is mined in a long slice.

However, things got back to normal in the second quarter. Royalty income in the first half was £6.9m, compared with £16.3m last year, so the second quarter made up 77pc of the total income.

The interim dividend was increased 4.7pc to 4.45p per share, despite the fall in income. Although dividend cover is likely to fall this year, this expresses confidence in future revenue streams. Indeed, four previous investments are close to having their royalty streams kicking in.

However, it also means that for the full-year, the dividend growth is unlikely to be as much as it could have been. Management aims to increase the payout by 7pc to 8pc a year. This year, that target could be in doubt.

The balance sheet is strong, with £20.4m in cash and no debt. The company plans to make three or four more purchases this year, following on from a deal this week which saw Anglo provide a C$5m (£3.2m) loan to Laramide Resources to help fund a uranium mine in New Mexico. This provides a 7pc coupon and comes with an option to buy a 5pc gross revenue royalty when the mine is operational.

The shares have fallen 10pc since Questor last said buy in

May at 278.1p as mining sentiment waned. Yielding 4.1pc, Questor maintains the buy rating on Anglo.